Human capital and economic growth

Abstract

Just as accumulation of personal human capital produces individual economic (income) growth, so do the corresponding social or national aggregates. At the national level, human capital can be viewed as a factor of production coordinate with physical capital. The framework of an aggregate production function shows that growth of human capital is both a condition and a consequence of economic growth. Human-capital activities involve not merely the transmission and embodiment in people of available knowledge, but also the production of new knowledge. Its diffusion generates worldwide economic growth, regardless of its initial geographic locus. Contrary to Malthus, economic growth has not been eliminated by population growth. Human-capital accumulation is an important link between economic growth and the ‘demographic transition’.